VF Corp launches strategic review of brand assets, CFO steps down

Dive Brief:

VF Corp.’s revenue fell 16% year over year to $3 billion for its third quarter, which the apparel conglomerate attributed to a “shift in timing of wholesale deliveries” that primarily affected its The North Face brand and the EMEA region, according to a press release Tuesday.
The company’s largest brands saw revenue drop by double digits, with Vans down 28%, Timberland dipping 21% and Dickies experiencing a 16% decline. Even The North Face, which was one of the few VF brands to experience growth in the company’s Q2 results, saw revenue fall 10% in Q3.
VF is initiating a “strategic review of the brand assets within its portfolio” with its board of directors “to ensure the company owns the brands that it believes create the greatest long-term value.” In a call with investors Tuesday, CEO Bracken Darrell announced that CFO Matt Puckett is stepping down later this year.

Dive Insight:

The portfolio review is in addition to the company’s previously announced Reinvent plan to bolster its brand building and sales in North America. That plan involved accelerating a turnaround for the Vans brand, including naming a new president for the segment. Kevin Bailey stepped down from the role and remains on the executive team, but the company has not yet named a replacement.

One of VF’s major brands may be sold as a result of the portfolio review to accelerate debt reduction, according to David Swartz, senior equity analyst for Morningstar Research Services.

“We do not think VF will sell The North Face or Vans as they are in attractive categories and have strong international and direct-to-consumer potential,” Swartz wrote in an analyst note. “However, it may sell Dickies, which is in the unattractive work category or Timberland, which is in the more dynamic outdoor category but has not kept pace with The North Face in becoming a lifestyle brand.”

Swartz said Timberland could be sold for about $1.6 billion, close to its amount of annual sales. He said VF is also expected to sell its backpack-focused brands soon, possibly for about $300 million.

Darrell, who has held the CEO role at VF since July 2023, called Tuesday’s earnings disappointing but said his confidence in the company’s future was rising.

“We are confident the actions we are implementing as part of Reinvent will enable VF to stabilize and then grow revenue and improve operational performance across brands and regions,” Darrell said in the release. “We have already begun to see the impact of our efforts to right-size the company’s cost structure and improve its inventory position, resulting in stronger than expected cash flow and expanded gross margin in the quarter."

In the call with investors, Darrell said CFO Puckett will remain in his role at VF until a successor is appointed.

“He and I have agreed that it's time to make a change as part of the overall transformation efforts we're introducing across the company,” Darrell said.

VF’s revenue declined in the Americas region by 24% to $1.59 billion, and revenue fell in the EMEA region by 7% to $912 million. The APAC region grew 2% to $461.6 million.

The company’s DTC revenue dropped 8% to $1.79 billion and wholesale fell 26% to $1.17 billion.

VF didn’t state revenue or earnings guidance for its full 2024 fiscal year and previously withdrew its outlook during its Q2 earnings results while suggesting that sales would be “modestly down or flat” for the rest of the fiscal year.

While “there was simply nothing that worked for VF in the third quarter,” Swartz said there was reason for optimism as Darrell “aggressively transform[s] every part of the business” through the Reinvent plan. More executive changes can be expected as the plan continues, per Swartz.

The company also announced in November 2023 that it would cut 500 jobs worldwide as part of the Reinvent plan.

Wedbush analysts led by Tom Nikic said in an analyst note that while the company’s desire to shakeup the C-suite is understandable, “this does add another layer of complexity to the turnaround.”

VF’s results come on the heels of a cyber attack in December 2023 that impacted its ability to fill orders. At the time, VF said the attack was “reasonably likely to continue to have a material impact on the Company’s business operations.” The company later disclosed that it impacted the personal data of 35.5 million consumers.